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Indiana legislators aren’t going along with all the federal tax cuts that President Donald Trump pushed through Congress last summer.
A hefty tax break for businesses included in what Republicans dubbed the “One Big Beautiful Bill” won’t be applied to state taxes under legislation advancing in the state Senate.
Republican fiscal leaders, however, haven’t said which of the dozens of other new federal tax cuts—including the temporary deductions for workers who receive tips and overtime wages—will be extended to state taxes.
An analysis from Gov. Mike Braun’s administration estimated that total state tax breaks on businesses and individuals could top $900 million over the next two years if the Legislature were to fully conform the state tax code with the federal changes.
The Senate Tax and Fiscal Committee last week endorsed Senate Bill 212 adopting a few of the federal tax breaks.
Committee Chair Sen. Travis Holdman, however, specified that the bill would not include a federal tax cut on some production property because of its cost.
“It’s just got a hefty price tag. It was $60-some million the first year, and it grew to like $300 million over four or five years,” Holdman, R-Markle, told the Indiana Capital Chronicle. “So it’s just just too hefty for us to do that.”
Sam Charron, a vice president of the Indiana Manufacturers Association, argued for adoption of that tax break, saying it “incentivizes manufacturers to increase their production capacity in the U.S. and, therefore, here in the state of Indiana.”
Uncertainty on other tax breaks
Holdman said his committee would take up a separate bill next week addressing whether to conform state tax law with 37 other provisions in the federal legislation.
He said the first bill focused on federal tax changes that would take effect for the 2025 tax year, with the aim of getting that bill to Braun’s desk by the end of January. It is set for a full Senate vote on Thursday.
Holdman hasn’t specified what will be adopted from the longer list, which includes the temporary federal deductions for workers who receive tips and overtime wages along with the interest on loans for vehicles built in the U.S.
The state analysis projects that taxpayers would save nearly $275 million over the next two years with the deduction for overtime wages.
The tax break on tips would total about $80 million during that time, while the vehicle loan deduction was estimated at $70 million.
The state tax code generally conforms with federal law for the simplicity of determining taxable income.
Indiana’s last major conformity update came in 2023, when Indiana adopted the Internal Revenue Code as of Jan. 1, 2023, bringing the state into line with pandemic-era relief measures such as the CARES Act and the American Rescue Plan.
Whatever tax measures the state Senate endorses will then go to the Indiana House for its consideration.
House Ways and Means Committee Chair Jeff Thompson, the chamber’s leader on tax matters, said he was in “ongoing discussions” on provisions such as the exemptions for overtime and tips income.
“I’ll look at everything, all our options, kind of see when the time comes,” Thompson, R-Lizton, said this week. “I’m not thinking much about it until it gets here.”
The Indiana Capital Chronicle is an independent, nonprofit news organization that covers state government, policy and elections.
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